Property Claims, Farm Trade and the Cuban Embargo

Nov 2, 2016  | 8 min  | Ep4211

Shortly after the 1959 Cuban Revolution, the U.S. enacted a trade embargo on the tiny island nation. Eventually, 11 million people found themselves under socialist rule.

But a warming between past Cold War foes has many pushing to lift the six-decade old embargo. Limited agricultural trade, possible since 2001, has those on both sides of the Florida Straits seeing the potential for new markets a scant 90-miles away. However, Cuban exiles with claims of their own may stand in the way of throwing the door wide open.

Peter Mestre/Miami, Florida: “This is one of my grandfather’s assets, which is Central Nela.  It’s a sugar mill.  It consists of 12,000 acres.”

Born in Cuba, Peter Mestre was 5 years old when his family fled Fidel Castro’s communist regime for Florida in 1961.  Well over a million Cuban immigrants now reside in the U.S. – holding considerable political clout in places like Miami – the exile community’s epicenter.

Peter Mestre/Miami, Florida: “When Castro took over in 1959, he nationalized all the properties and told all the Americans to leave the country.  Basically…confiscated everything.”

Mestre says his grandfather, an American citizen and veteran of World War I and II, went to Cuba in 1920 as an entrepreneur.  Eventually he acquired businesses, property, real estate and farmland there worth an estimated $4.5 million, but it was all taken away following the Cuban Revolution.  And as the U.S. and Cuba meander towards normalization, the issue of unresolved property claims is a major sticking point. 

José Pallí/Attorney – World-Wide Title: “There are a number of fantasies.  It’s like Disney World of opposition to this.  So I don’t really spend a lot of time focusing on that.  What I do spend time on is understanding better the legal system in Cuba.”

José Pallí is an attorney specializing in land title registration.  Like Mestre, his family left Cuba in the wake of Castro’s rise to power, but relocated to Argentina.  He first practiced law in Buenos Aires and later moved to south Florida.  Pallí says his knowledge of the parallels in Latin American legal systems and their contrast with U.S. law could lend insight to the challenges ahead.

José Pallí/Attorney – World-Wide Title: “All countries have a right to take property from foreigners, offering of course some kind of compensation for that.  And Cuba did.  Cuba offered a way of paying that nobody wanted to accept.”

According to USDA, America controlled 75 percent of the arable land in Cuba when Castro’s socialist state was established nearly sixty years ago.  Diplomatic strain led to Cuban government seizure of all foreign assets on the island nation.  In response, the Eisenhower Administration cut ties with Havana and imposed a trade embargo which was later solidified by President Kennedy. 

The property rights of American residents, farmers and corporations, along with those of many Cubans also who fled the country, became collateral damage.  And under Cuba’s Marxist ideology, seized land and property has been redistributed among the state and its citizenry. 

By the late 1960’s, just over 5,900 American companies and private citizens had their legal allegations certified with the Foreign Claims Settlement Commission of the U.S. Justice Department.  Restitution totaled nearly $2 billion dollars at the time, which today, with interest, brings the bill to $8 billion.

In turn, Cuba’s counterclaims for alleged damage done under the embargo, or blockade as they call it, range from $121-$300 billion. 

Peter Thomson/United Nations General Assembly President: “The result of the vote is as follows.  In favor, 191.  Against, zero.  Abstentions, two.  Draft Resolution A/71/L3 is adopted.”

For the first time in 25 years, the U.S. abstained from voting on a symbolic United Nations resolution to condemn the economic embargo against Cuba, providing continuity with recent Obama Administration strides. 

But only the U.S. Congress has the authority to lift the embargo and allow free trade.  Agriculture has had a small taste of it, with limited exports to Cuba allowed since 2001.  However, incremental federal lawmaking has made settlement of the U.S. Certified Claims, along with separate claims by Cuban-Americans, a precursor to the embargo’s demise. 

Professor Michael Kelly/Creighton University School of Law: “Every President has underestimated the Castros, I think.  Nevertheless, it’s good to have plans in the books for the eventuality.”

Professor Michael Kelly, at Creighton University’s School of Law in Omaha, Nebraska, helped design a 2007 blueprint for compensation of expropriated property in Cuba.  The report was part of a Bush Administration effort to engage a hypothetical future Cuban democracy, and recommended either lump sum payment or a bilateral claims tribunal. 

Peter Mestre/Miami, Florida: “What I think they should do is pay it.  They were undervalued at the beginning.  The $4.5 million with interest is now worth about $20 million.  I think it’s fair that you should be compensated.”

Claimants like Peter Mestre say Cuba has earned a reputation as a serial debtor by repeatedly reneging on its financial obligations.  And Professor Kelly admits monetary claims would likely be offered pennies on the dollar, but adds most companies are more interested in access to the Cuban market.

Professor Michael Kelly/Creighton University School of Law: “Most of the bigger claims are corporate claims.  For instance, Coca-Cola…if you go to Atlanta and ask them, do you want this old bottling plant back outside Havana?  No, they don’t want the bottling plant back.  What Coke wants is distribution rights on the island before Pepsi gets there.”

While that approach may work for business, some claimants, like Carolyn Chester, who also resides in Omaha, feel left in the lurch. 

Carolyn Chester/ Omaha, Nebraska: “They also took over the radio stations, tv stations, newspapers…”

Of the total $8 billion in claims, she inherited an I.O.U. now worth $2 million – a small sliver of the meager $200 million assertion made by families displaced following the revolution.             

Carolyn Chester/ Omaha, Nebraska: “My father worked hard for his money.  He didn’t make his money in Cuba – he lost his money in Cuba.  He made his money working for CBS, being a reporter.”

Edmund Chester covered the Caribbean and Latin America as a U.S. citizen residing in Cuba.  He left for a stint in New York as the boss of legendary journalist Edward R. Murrow, but returned to dabble in telecommunications and purchased 80 acres with plans to start a citrus farm.  Instead, he was forced to flee.

Carolyn Chester/ Omaha, Nebraska: “My father was a patriot and that’s what I don’t understand is why my government is not going to bat for me.  But there’s a solution to this.  All they’ve got to do is figure it out.”

Neither the U.S. nor Cuba is eager to payout the sums each government demands, forcing complex negotiations likely to reach well beyond President Obama’s tenure.  But absent a resolution, farm and business groups fear potential market share could erode in favor of foreign competitors.

For Market to Market, I’m Josh Buettner.

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